We know that these are uncertain times. We’re watching the world change before our eyes due to the COVID-19 outbreak, stock markets declining 30% into bear territory, and OPEC price wars. This means a shifting landscape for startups and emerging growth companies. There are several things businesses must be considering right now in order to address the economic changes ahead.
Most pressingly, emerging growth CEOs need to be thinking about how to extend their company’s cash runway to 24 months. If 24 months is not possible, then companies should make every effort to extend their runway for at least 6 additional months. This amount of time should allow companies to weather the economic change caused by the unforeseen circumstances we’re currently facing.
CEOs have a few different options for extending their cash runaway quickly:
- Raise debt. Drawdown your existing debt commitments, it’s like buying insurance. If you do not have a facility in place, look to banks, venture debt firms and the government.
- Garner insider support. Open a SAFE at very favorable terms or obtain a bridge loan from existing investors. Raising more equity can extend your runway quickly.
- Cut your hiring plan by 50% or more. Consider reducing your hiring plan by at least 50%. This is a great way to keep cash burn under control while still achieving key milestones.
- Cut inefficient marketing spend. Reduce your marketing spend, especially the amount spent on experimentation. Customer acquisition costs must be driven down.
Taking proactive steps like what we’ve outlined above will help emerging growth companies extend their cash runway to 24 months and give company management more time to address additional realities their companies may be facing.
